Does it pay to get an A? School resource allocations in response to accountability ratings

This paper examines public school district budgetary responses to school accountability ratings. We identify school district budgetary changes through a “rating shock” due to a major change in school accountability systems in Texas. Texas implemented a new accountability system and new exam, and allowed schools a “gap” year to adjust to the new test. Using the new Texas exam as an exogenous change, we find a 1.5% increase in instructional budgets, mainly for teachers, as a response to a drop in rating. This increase is found to disappear within 3 years, suggesting temporary budget support to “learn” the new system but no long run institutional change.